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Tuesday, March 13, 2012

March 13 (Bloomberg) -- Last month, Hawaii lawmakers killed a proposed tax that would have added 17 cents to a single-serve bottle of soda. It was the second failed attempt, even though Governor Neil Abercrombie had pushed the proposed levy.

Like many advocates of a sugary beverage tax, Abercrombie faced a well-funded lobbying campaign from soda makers opposed to such efforts, which are designed to stem rising rates of obesity. Since the beginning of 2009, PepsiCo Inc., Coca-Cola Co. and the American Beverage Association have spent as much as $70 million on lobbying and issue ads, according to the Center for Science in the Public Interest, a proponent of soda taxes.

Efforts to enact such levies have foundered in 30 states.

"Whoever is loudest tends to control the discussion and, generally speaking, you buy your microphone with money," said Judith Phillips, a research analyst for Mississippi State University who studied the issue for lawmakers.

Health advocates agree soft drinks are an unhealthy source of sugar in Americans' diets. More than 35 percent of U.S. adults and about 17 percent of youths -- or roughly 90 million people -- are considered obese, according to the Centers for Disease Control and Prevention. Some say taxing soft drinks is one of the most effective ways to reverse the trend.

Following the presidential election, states and cities may restart a push on soda taxes. Philadelphia Mayor Michael Nutter hasn't ruled out a third try for a tax on sugary beverages. In Baltimore, Mayor Stephanie Rawlings-Blake wants to more than double a 2-cent per container tax adopted in 2010 to 5 cents. Richmond, California, a San Francisco suburb, will put a soda tax referendum to voters later this year.

Money Grab

Opponents of soft-drink taxes say they're little more than a money grab. Blaming obesity on sugary soft drinks misses the real cause of the problem -- too many calories of any type going in, and not enough going out, they say. In a paper titled "Our Position on Obesity," Coca-Cola cites 45 scientific studies, reviews, and reports to contradict claims that sugar-sweetened beverages are the primary cause of obesity.

Diana Garza Ciarlante, a Coca-Cola spokeswoman, declined to comment, as did Peter Land, a PepsiCo spokesman. They referred questions to the ABA.

Obesity in the U.S. comes at a "staggering" financial cost, the CDC has said. Everything from treatments for diabetes to lost work by obese employees cost Americans about $147 billion in 2008, according to one estimate cited by the agency.

In 2009, President Barack Obama recommended exploring a federal tax on sugary drinks to help pay for health-care reform. The effect was like shaking a can of Coca-Cola and cracking the tab. Emboldened lawmakers in 30 states proposed levying their own soda taxes on the $74 billion U.S. soft drink industry.

Budget Gaps

The love affair with soda taxes wasn't simply about improving citizens' health; many states also aimed to close budget gaps.

If a soda tax makes sense anywhere, it makes sense in Mississippi, said Kelly Brownell, director of Yale University's Rudd Center for Food Policy & Obesity in New Haven, Connecticut. The state has the highest obesity rates in the U.S. -- 34 percent of Mississippi's adult population is considered obese -- and increasing numbers of children are heading in that direction.

"The fact that it got considered there at all is a testament to how powerful the idea is," Brownell said. "A soft-drink tax is the only thing to address obesity that doesn't cost money and in fact generates money that you can use for other important programs."

In 2010, Mississippi state legislator John Mayo, a Democrat, filed a bill to levy a 2-cent per ounce excise tax on soft drinks. It would have added 24 cents to a 12-ounce can of pop, or $1.35 to a $1.47 2-liter bottle of Coca-Cola. The proposal included bottled tea and juices containing less than 100 percent fruit.

Long Odds

A legislator since 2000, Mayo had been around long enough to know the odds were long that his bill would pass, he said in an interview. He simply wanted a debate about whether sugary beverages were making Mississippians fat.

When a politician starts making noises about soda taxes, the state beverage association typically rolls into action. Found in every state and made up of local manufacturers and distributors, they work with the industry-funded ABA, creating a network that reaches from town hall to the U.S. Congress.

The soft drink companies are well represented at the state level, as well. Coca-Cola's North American bottling operation, for example, has seven regional business units. Each has a public relations and government affairs team whose sole responsibility is to bore into local communities like moles.

Substantial Threat

Ron Aldridge, head lobbyist for the Mississippi Beverage Association, said Mayo's bill didn't stand a chance. Still, he was leaving nothing to chance.

"You take any threat as substantial in our world because you never know how the public might move," Aldridge said in an interview. "You prepare for the worst."

Aldridge, a lawyer and former state legislator in Jackson, Mississippi, is state director for the National Federation of Independent Business, which he asked to speak out against Mayo's bill. His son was personal assistant to then Governor Haley Barbour, who announced he'd veto Mayo's proposal days after it became public.

Meanwhile, Bill Brown, a Pepsi distributor, said Mayo's bill could cost jobs in an already tenuous economy. Brown held meetings to "educate" his workers about the threat and urged them to call their local legislators in opposition. Flyers in employee's paychecks framed the message: "This is our livelihood."

Mayo's bill died in committee.

The soft drink companies didn't declare victory. Nor did they in the 30 states where similar bills also foundered.

That's because they know a growing stigma against sugary drinks, fueled by findings that sugar can be addictive and triggers cancer, may shift public sentiment, said Bonnie Herzog, an analyst with Wells Fargo & Co.

"It's an ongoing risk," said Herzog, who is based in New York. "And over time that risk has increased."